How often can your auto insurance provider increase your rate?

Depending on their insurance provider, drivers may have noticed that their auto insurance increased upon their annual policy renewal this year

While there are several reasons why car insurance increases, the big question is: why does it happen and how often can your insurance rate increase?

Why your auto insurance rate may increase

There are several factors that can drive up your insurance premium. One is your driving record. The more accident claims and violations, the higher your rate.

Other elements include if your location has a high claims rate, high traffic incidents or thefts. Age can also be a factor, with younger drivers having less experience on the road and as a result, facing higher rates.

Rates were flat during the pandemic because people weren’t driving. Now that more people are back on the road, there is an increased risk of accidents and a higher number of claims. Add to that inflationary pressures that are now affecting policies. The cost of everything has gone up, including car repairs and the cost of replacing an entire vehicle, says Bruce Green, director of rate and underwriting regulation strategy at the Financial Services Regulatory Authority of Ontario (FSRA), the regulatory body that approves rate increases for Ontario insurance companies.

“Vehicles are getting more expensive to insure as they get more sophisticated, plus the rising cost of repairing those parts,” says Green. He also pointed out that ongoing supply chain issues mean people are holding on to their vehicles longer, which means more wear and tear.

So, as the costs go up, so do the claims and that means that premiums can go up to cover the costs of claims.

In a situation like this, insurance companies will apply to FSRA for an increase in rates.

How often can your car insurance company increase your rate?

The good news is that your insurance company generally can’t raise your rate midway through your policy term, since your premium is usually set for a year, says Green.

In provinces where auto insurance is privately run, insurance companies have to have their proposed increase approved by the provincial regulatory body. The insurance companies need to show that the rate increase is necessary. This is usually done by their showing that the claims being paid out are higher than the premiums the company is receiving. The regulatory body reviews the increase and from there, several things can happen: either it’s approved, denied, or sent back to be modified, where the approval process begins again.

If a rate increase is approved, this doesn’t mean that every auto insurance policyholder will see a rate increase of that amount on their policy. It’s an average increase and depends on each driver’s record.

As well, if your situation changes, like if you receive a traffic ticket or file an at-fault claim, then you will likely see an increase in your premium only when it’s time to renew your policy. This is why it’s always a good idea to shop around for car insurance every year, particularly as you approach your policy renewal date.

Now, if you update your policy to reflect a usage change — for instance, your mileage, or you start using your personal vehicle for business purposes — this may trigger a mid-term policy change. “This may vary depending on your insurance provider,” says Green, “but the policy would typically be amended mid-term to reflect the change in risk.”

Even if you get hit with a rate increase, there are ways to keep your insurance policy affordable:

• Compare insurance policies and quotes from multiple providers before you buy.
• Bundle your home and auto insurance policies to get lower premiums for each.
• Consider a higher deductible.
• Pay your entire yearly premium at once. Some companies will offer a discount for this.
• Maintain a clean driving record.
• Get only the coverage you need.
• Explore usage-based insurance, which will reward you in the form of a discount if you’re a safe driver.

In addition to taking advantage of all the offers from their company, Green says drivers should also shop around before they sign their renewal. There are always options that may be more affordable and make sense for your budget and driving history.

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